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Absolutely no pegging J$ to US$, says Clarke

MONTEGO BAY, St James — In response to a recent call for the pegging of the Jamaican currency to the US dollar, Minister of Finance Dr Nigel Clarke has highlighted the creation of 100,000 jobs among a raft of tangible gains the economy has derived from the current floating exchange rate regime.

“We have more people employed in Jamaica today than ever before as a result of the policies that Government is pursuing which build on policies pursued before, even with the Government before, and the Government before that,” the finance minister said.

In the wake of the recent fluctuation of the Jamaican currency, Private Sector Organisation of Jamaica (PSOJ) President Howard Mitchell called for a fixed exchange rate regime by pegging the Jamaican currency to the greenback.

“I am calling for the Jamaican dollar to be pegged to the US currency. I am calling for it from Montego Bay because Montego Bay has the most experience with dollarisation. We can teach Kingston. I want to abandon this fiction of a managed exchange rate in our open, fragile economy,” Mitchell said last Tuesday at a function in Montego Bay.

But speaking from the same city during Wednesday evening's official opening of the Victoria Mutual Fairview Financial Centre, Dr Clarke came out in staunch defence of the floating exchange rate, and said that the Government is bent on guarding against policy reversal.

“Members of the financial community, members of the community of those who are in the market for mortgages and home ownership, and those who want to take advantage of the opportunity that's created by this unprecedented environment, you can act with every confidence that the Government of Andrew Holness, in which I have the privilege of being financial minister, will not be engaged in any policy reversal,” Dr Clarke said.

“We have borne too much; we have come too far. The fruits of our sacrifice are much too evident for us to jump on any train of policy reversal.

“Jamaica, over a long period of time, has veered from policy option to policy option, implementing something just to rip it up next day, engaging in what we describe as policy volatility. We have lived here, we know what that experience has done to our prospects and to the lives of the Jamaican people,” he continued.

The finance minister also pointed out that presently, as a result of Government policies, the capital expenditure that we are able to execute today is 100 per cent more than the capital expenditure that we executed three or four years ago.

“Our spending on social support is 60 per cent higher than our spending on social support three or four years ago. Those are tangible gains from our economic reform programme. Anybody interested in policy reversal, you go and talk to the people who have benefited from the 60 per cent increase in social support, talk to the people who have benefited from 100 per cent increase in capital expenditure,” Dr Clarke said.

The PSOJ president had lamented that, recently, the local currency has continued to slide.

“The fact is, today, in the height of the tourist season when dollars are flowing, and in spite of BOJ (Bank of Jamaica) intervention on at least two occasions, maybe three, the (US) dollar is hovering at about (J$)132/133, coming from (J$)125 in a matter of 12 days,” he pointed out.

Dr Clarke countered that the floating rate regime is characterised by much less central bank activity than used to be the case.

“For the first four months of this year, the central bank has sold approximately US$160 million on a net basis into the market. You can see the trend, a trend where the central bank's participation in a market driven by private agents, have been reduced significantly over time,” he argued.

“It so happens that that has come at the same time that our reserves on the central bank are at the highest level that they have ever been over the last several months, on a net basis and on a non-borrowed basis. It so happens that this transition from an exchange rate that has been characterised by a one-way movement to one of two-way movement, to one of small movements, has also been accompanied by successive reduction of interest rates to levels we never thought possible. It has been accompanied by inflation rates that have been low and stable for a longer period than we ever thought possible. It has been accompanied by employment growth to levels that are record levels in Jamaica's entire history,” Dr Clarke said.

The finance minister warned that individuals who want to put pressure on the central bank should be viewed with suspicion.

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